Keywords: marine insurance; sanctions; conflict of laws; arbitration; enforcement of awards.

Relevance

Since 2022, sanctions pressure on Russian shipping has brought marine insurance to the forefront. Due to the sanctions, insurers began withdrawing from providing cover for Russian vessels on a widespread basis from spring 2022, creating a tangible risk of disruption to maritime trade. The Russian market, however, has demonstrated a capacity for adaptation. With state support through the Russian National Reinsurance Company (RNRC), insurers gained access to reinsurance capacity. From March 2022, pursuant to instructions issued by the Bank of Russia, RNRC has been required to assume no less than 50% of sanctions-related risks, and its capital has been increased to RUB 750 billion.¹ This enabled leading Russian insurers to continue providing insurance cover for fleets of major shipping companies, such as Sovcomflot. In addition, the Russian market succeeded in engaging partners from so-called “friendly” jurisdictions, including China and India. For example, in 2024 RNRC provided financial guarantees supporting the accreditation of Russian insurers in India, enabling them to insure tankers there directly.

These measures underscored the significance of the subject for national regulation: the situation effectively became a stress test for Russian insurance lawmaking and judicial practice. Russia’s legislative and judicial authorities have sought to neutralise the adverse impact of sanctions. Against the backdrop of the 2018 “anti-sanctions” legislation and the accompanying market debate, the view was expressed that, in the field of direct insurance, insurers should refrain from including “sanctions clauses” that equate the imposition of sanctions to force majeure and are used as grounds to deny insurance indemnity.² In judicial practice, a general approach has taken root whereby denial of an insurance payment cannot be arbitrary and must be grounded in law and the terms of the contract, while “coverage exclusions” should not substitute for, or expand, the statutory grounds on which an insurer may be exempt from payment. At the same time, compliance requirements have intensified. Insurers and shipowners are required to conduct thorough due diligence of counterparties and cargoes to ensure that contractual performance does not result in a breach of applicable sanctions regimes.

Sanctions have also generated new legal challenges for judicial proceedings and maritime arbitration. Russian courts and arbitral institutions have been required to address disputes concerning non-performance caused by sanctions, the validity of sanctions clauses, and allocation of jurisdiction in such disputes. In particular, the Commercial Procedure Code of the Russian Federation now contains special provisions allowing persons affected by sanctions to bring proceedings before Russian courts notwithstanding contractual foreign jurisdiction or arbitration agreements, where sanctions materially hinder access to justice (Articles 248.1 and 248.2). Another pressing issue concerns the recognition and enforcement of foreign judgments and arbitral awards, for instance, whether enforcement in Russia would contravene Russian public policy where an award is rendered in favour of an insurer that denied payment solely on sanctions grounds.

Practice in 2022–2025 has demonstrated both the vulnerability of traditional insurance arrangements to geopolitical risk and, at the same time, has acted as a catalyst for the development of domestic legal infrastructure, from mechanisms of state support for insurance to procedural guarantees ensuring fair judgment of sanctions-related disputes within Russian jurisdiction.

The Marine Insurance Contract: Features of Formation and Performance

Maritime transport is traditionally accompanied by numerous risks such as technical, navigational, commercial, as well as legal risks arising from its international character. Marine insurance contracts are ordinarily concluded on standard terms; however, in the context of sanctions they increasingly incorporate special provisions. On the London insurance market, sanctions clauses are widespread: they discharge the insurer from liability where performance would result in a breach of applicable sanctions legislation. A prominent example is the Lloyd’s clause LMA3100 (in 2023 an updated version, LMA3100A, was published with the same substantive effect, suspension of cover, alongside the broader LMA3200 formulation), under which the insurer is not liable to make payment under the policy where such payment would expose it to sanctions under US, EU, UK, or UN regimes.

Russian legislation, by contrast, treats such clauses critically. In 2018, Federal Law No. 127-FL of 4 June 2018 “On Measures of Influence in Response to Unfriendly Actions of the United States and Other Foreign States” prohibited the inclusion of sanctions clauses in direct insurance contracts. The prohibition is grounded in the impermissibility of facilitating the requirements of foreign sanctions regimes. D. Malyshev, Deputy Chairman of the Management Board of PJSC SOGAZ, noted that inclusion of a sanctions clause in a direct insurance contract de facto implies impossibility of payment due to sanctions, which may expose a Russian insurer to liability.³ Nevertheless, sanctions clauses persist in reinsurance: foreign reinsurers insist on their inclusion, and without such terms it is difficult to place risk on foreign reinsurance markets.

Excluded Risks

Insurance policies traditionally exclude war risks, confiscation, and nuclear incidents. In context of sanctions, such exclusions are expanded to include voyages, cargoes, and trade routes that are directly prohibited under applicable sanctions regimes or that entail heightened sanctions-related compliance risk. Relevant lists of excluded trades and routes are maintained and regularly updated by P&I Clubs and in the Lloyd’s market.

Due Diligence and Compliance Mechanisms

The inclusion of sanctions-related provisions obliges the parties to strengthen compliance measures. Prior to entering into the contract, the insurer conducts detailed due diligence in respect of the vessel, cargo, shipper, consignee, shipowner, and other beneficiaries in order to ascertain whether any of them appear on sanctions lists (including the US OFAC SDN List; EU and UK sanctions lists, etc.), and also assesses the nature of the cargo to confirm that it is not subject to export controls.

In international shipments, insurers typically require detailed warranties and representations concerning end-users, the vessel’s route, and ports of call. Contracts increasingly contain termination clauses granting the insurer the right to terminate the cover upon the imposition of new sanctions. To mitigate risk, insurers adopt internal compliance protocols: transactions involving sensitive trade routes are escalated to management; specialist sanctions counsel is engaged; and specialised databases are used.

The insured is likewise required to exercise due care: concealment of a sanctions designation or other sanctions-related connections may result in loss of insurance cover. In 2023–2025, financial regulatory authorities issued updated guidance for the insurance sector. On 20 December 2023, OFAC published updated clarifications concerning the Russian oil “price cap,⁴” while on 18 July 2025 the UK Office of Financial Sanctions Implementation (OFSI) updated sectoral guidance, confirming the availability of a “safe harbour” for so-called “Tier 3” insurers, provided adequate customer due diligence is performed.⁵ Such guidance enables insurers to provide cover without incurring liability for sanctions, provided they strictly comply with the relevant regulations.

Rights and Obligations of the Parties; Insurer Liability

Russian law regulates the rights and obligations of the parties to marine insurance in detail in the Civil Code of the Russian Federation and Chapter XV of the Merchant Shipping Code of the Russian Federation. Under Article 250 of the Merchant Shipping Code of Russian Federation, the insured must disclose to the insurer all material circumstances of the risk; in cases of intentional concealment, the insurer may avoid the contract (effectively, treat it as voidable) and retain the premium received. This approach corresponds to the principle of utmost good faith in English law (Sections 17–18 of the Marine Insurance Act 1906). Russian law, however, affords comparatively greater protection to the insured: the insured is not required to disclose facts that are generally known or that should already be known to the insurer. Moreover, where the insurer did not ask a specific question regarding a particular fact, the insurer is precluded from subsequently relying on non-disclosure of that fact. These rules limit abuse of the right: the insurer is required to exercise reasonable diligence in gathering information.

In 2015, English insurance law underwent significant reform. The UK Insurance Act 2015 transformed the principle of utmost good faith into a duty of fair presentation of the risk.⁶ In other words, the insured must provide sufficient information about the risk to put a reasonable insurer on notice and enable further inquiries, rather than being subject to a strict obligation to disclose every material fact. Where the duty of fair presentation is breached, the new rules generally preclude automatic avoidance of the policy (except in cases of deliberate concealment or fraud). Instead, the insurer’s remedies depend on what the insurer would have done had the insurer been in possession of full information. For example, if the insurer would still have entered the contract but on different terms, the policy remains in force on those amended terms, and the insured’s indemnity may be adjusted accordingly.

The 2015 Insurance Act also revised the treatment of warranties. Under the 1906 regime, breach of a warranty automatically discharged the insurer from liability from the moment of breach, regardless of whether the breach was connected to the loss. Under the new approach, breach of a warranty generally suspends cover rather than terminating it. The insurer may not refuse indemnity if the breach has been remedied before the insured event occurs, or where the breached term is not relevant to the risk of the loss. In addition, so-called “basis of contract” clauses, previously allowing all statements in the proposal form to be treated as warranties, are now prohibited.

Overall, the Insurance Act 2015 shifted the balance of interests by replacing rigid and severe consequences for insureds with more flexible and proportionate remedies that account for the parties’ good faith. Russian legislation did not directly transplant these reforms; however, many protective elements were historically embedded in Russian law (for example, the exemption from disclosing generally known facts and the prohibition on insurers relying on non-disclosure of matters not expressly inquired into). Accordingly, in its underlying logic, Russian rules on good faith largely converge with the 2015 reform approach, notwithstanding differences in technical implementation.

The insurer is required to issue an insurance policy in the prescribed form (Article 251 of the Merchant Shipping Code of Russian Federation) and, upon occurrence of an insured event, consider the claim within the statutory timeframe, bearing liability for an unjustified refusal.

The law also provides grounds on which the insurer may be released from liability. In particular, the insurer is not liable for losses caused by the insured’s fault (intent or gross negligence, Article 265 of the Merchant Shipping Code of Russian Federation). Another basis for refusal arises where there is a significant increase of the insured risk. Under Article 271 of the Merchant Shipping Code of Russian Federation, if after entering the contract the risk materially increases as a result of the insured’s actions (for example, the vessel’s route is changed to a more dangerous one, or prohibited cargo is taken on board), the insurer may demand amendment of the contractual terms or terminate the contract entirely.

Denial of Cover and State-Backed Mechanisms

An insurer, like any other contracting party, may refuse to enter a contract. In the context of sanctions, this right has been exercised with increasing frequency: in the spring of 2022, Western insurers broadly terminated cover for Russian vessels and refused to renew existing policies. For Russian insureds, this posed a risk of disruption to shipping operations, as vessels without insurance may be denied entry to seaports and detained for lack of financial security for liability.

In response, a system of state-backed mechanisms was introduced. As noted above, since 2022 Russian insurers have relied on reinsurance support provided by the Russian National Reinsurance Company: 50 per cent of mandatory reinsurance cessions in respect of sanctions-related risks are placed with RNRC.⁷ This enabled Russian insurers to maintain coverage for the Russian-flag fleet.

Accordingly, marine insurance contracts in the sanctions era have acquired new features. The parties are required to take geopolitical constraints into account both at the stage of entering contract and performance stages. The insured must provide full and accurate disclosure and ensure the lawfulness of the voyage, while the insurer must mitigate sanctions-related risk. Contracts increasingly contain special terms (sanctions clauses, exclusions, warranties), breach of which may result in denial of coverage. Russian legislation seeks to protect insureds from arbitrary denial of coverage on sanctions grounds by prohibiting such clauses in direct insurance, whereas international practice often permits insurer relief where sanctions exposure arises. In these conditions, market participants must manage sanctions risk throughout the transaction lifecycle; otherwise, insurance protection may prove ineffective even if, formally, the policy remains in force.

Dispute-Resolution Practice: Sanctions as a Defence and the Evidentiary Threshold

Judicial practice indicates that reliance on sanctions as a defence to non-performance is far from straightforward. In Siemens Energy Inc v Petróleos de Venezuela SA, the Venezuelan party PDVSA asserted that it could not continue to make payments under a credit agreement denominated in US dollars because of US sanctions.⁸ The federal court, however, found that payment was not objectively impossible. As the United States Court of Appeals for the Second District observed, PDVSA failed to demonstrate that it had exhausted all reasonable avenues of performance: it neither attempted to effect payment through an alternative bank or in another currency nor sought regulatory guidance from OFAC. The court rejected the force majeure defence and upheld the judgment on the debt.

Commenting on this precedent, R. Kilpatrick notes that the judgment reflects a broader international trend: a party relying on sanctions bears a high evidentiary burden and must demonstrate that sanctions render performance truly impossible, rather than merely more difficult.⁹ In other words, reliance on sanctions as a force majeure event requires proof of near-total impossibility of performance, and the debtor must establish that it took all reasonable steps to perform its obligations (the court emphasised the need to take “practically all measures within its power”). Abstract references to hypothetical obstacles are insufficient: a party “cannot profit from an impossibility defence grounded merely in speculation.”

A similar approach can be observed in Singapore. In Kuvera Resources Pte Ltd v JPMorgan Chase Bank,¹⁰ the dispute concerned payment under a letter of credit confirmed by JPMorgan. Payment was delayed by reference to a sanctions clause. The bank refused to pay the exporter, asserting that the carrier vessel was allegedly connected with a sanctioned Syria interest (which could have resulted in a breach of US sanctions). This assertion was supported solely by the vessel’s inclusion on an internal compliance watchlist maintained by the bank.

The Singapore Court of Appeal construed the sanctions clause strictly and placed the burden of proof on the bank. The court held that internal suspicion or uncertainty was insufficient. A party invoking a sanctions clause must provide objective evidence that performance would in fact breach sanctions. In that case, the bank failed to establish that the vessel was owned at the relevant time by a sanctioned person: beneficial ownership information was incomplete and did not confirm ongoing Syrian control. The court emphasised that an information deficit and other compliance “red flags” are not equivalent to legally sufficient proof of a sanctions breach.

Moreover, the bank sought guidance from OFAC only after refusing payment, attempting to justify a decision that had been taken based on assumptions. The court found this approach improper: in conditions of uncertainty, the bank should either have honoured the letter of credit or obtained clear regulatory guidance before withholding payment. As it had done neither, the refusal to pay constituted a breach of the letter of credit. The court ordered payment, underscoring that sanctions clauses do not entitle a bank to withhold payment absent compelling and substantiated grounds.

This judgment illustrates that courts require a high level of proof regarding the applicability of sanctions. The risk of potential sanctions consequences does not justify breach of contract. From the risk allocation perspective, this means that the sanctions risk largely remains with the party obligated to perform a payment obligation. If the law does not directly prohibit payment, the debtor (whether a bank under a letter of credit or an insurer paying insurance indemnity) must identify all lawful means to perform, for example, paying in another currency, using alternative payment routes, or obtaining a specific authorisation.

Thus, international practice tends toward constraining the use of sanctions clauses and raising the standard of proof for sanctions-based impediments. Sanctions are treated as a valid excuse for non-performance only where performance is objectively impossible even with maximum diligence. For the Russian insurance sector, this suggests that even when dealing with foreign partners and sanctions exposure, insurers should actively deploy compliance-adaptation tools (special payment-mechanism clauses, alternative performance clauses, etc.) rather than rely on broadly exculpatory provisions.

National and International Regulation of Marine Insurance

In the Russian Federation, marine insurance relationships are governed by Chapter 15 of the Merchant Shipping Code of Russian Federation (1999) (Articles 246–281) and the general insurance provisions of the Civil Code of the Russian Federation. The Merchant Shipping Code of Russian Federation defines the marine insurance contract (Article 246), prescribes formal requirements (written form; insurance policy, Articles 248 and 251), and specifies the insurable interest. The object of insurance may include any proprietary interest connected with merchant shipping, including the vessel, cargo, freight, passage fares, expected profit, shipowner liability, as well as reinsurance. The law permits such interests to be insured with a foreign insurer, including in respect of vessels flying the Russian flag, at the shipowner’s election.

The Russian Merchant Shipping Code largely reflects English law. It enshrines principles closely connected to classical English marine insurance rules: indemnity within the loss; invalidity of a contract in the absence of insurable interest (Section 4 of Marine Insurance Act 1906); the insured’s right of abandonment (Articles 278–279 of the Merchant Shipping Code of Russian Federation); double insurance (Article 260 of the Merchant Shipping Code of Russian Federation); subrogation (Article 281 of the Merchant Shipping Code of Russian Federation); and the insured’s duty to prevent or minimise loss (Article 272 of the Merchant Shipping Code of Russian Federation), analogous to the English “sue and labour” principle.

General average is of particular importance as a mechanism for equitable allocation of losses arising from an extraordinary sacrifice made to preserve the vessel or cargo. For example, if part of the cargo is jettisoned or the vessel is intentionally grounded to save the maritime adventure, the resulting losses and expenses are apportioned among all voyage participants pro rata to their interests. The Merchant Shipping Code of the Russian Federation (Chapter 16) defines general average (Article 284) and refers to party agreement on the applicable rules for its adjustment. In practice, bills of lading and charters typically provide the application of the York–Antwerp Rules.

Marine insurance is closely connected with general average, as insurers commonly cover the insured’s contribution thereto. The law obliges the insurer to provide a general average guarantee (or otherwise furnish security for such contributions) and to protect the insured’s interests during the preparation of the adjustment. In practical terms, the insurer must either provide security in respect of the insured’s contribution or reimburse the relevant sums subsequently.

At present, the York–Antwerp Rules are de facto dominant as a form of informal, non-state codification (the YAR 2016 edition is relevant, with a 2022 technical amendment concerning the rate of allowance). These rules have become an international standard: virtually all bills of lading and charters incorporate them, and standard insurance terms often refer expressly to YAR.

English insurance law continues to exert leading influence over global marine insurance regulation. As Professor Howard Bennett notes, provisions of the MIA 1906 “de facto dominate marine insurance worldwide,” and many states have either drawn upon them or implemented them directly.¹¹ In this sense, the Russian merchant marine insurance section substantially reproduces English law constructs.

EU law regulates insurance activity primarily through sectoral directives (such as Insurance Distribution Directive and Solvency 2), which generally affect marine insurance only indirectly. By contrast, EU sanctions regulations have a direct regulatory impact on the sector. Between 2022 and 2025, the EU adopted the 15th through 18th packages of amendments to Regulation 833/2014,¹² and on 18 July 2025 the EU and the UK announced coordinated reductions of the Russian oil “price cap” to USD 47.60 (with entry into force in September 2025),¹³ thereby affecting the availability of marine insurance. Sanctions regulations prohibit the insurance and reinsurance of certain shipments (for example, the transport of oil priced above the applicable cap or supplies to Crimea) and prohibit the satisfaction of claims arising from such prohibited transactions.

Essentially, marine insurance regulation is multi-layered. National laws provide the underlying contractual rules. International “soft law” instruments (such as the York–Antwerp Rules) supplement these rules to ensure uniform practice. Supranational requirements (EU directives, sanctions regulations) influence market access and party behaviour. Sanctions have become a new factor fragmenting legal regimes: whereas the Lloyd’s market historically served as a unifying force, the Russian sector now operates under distinct rules supported by the state, while Western insurers adhere strictly to sanctions regulations. This dynamic is closely connected to the conflict-of-laws issues addressed below.

Conflict-of-Laws Issues and Commercial Courts’ Practice

Sanctions have prompted the emergence of specific conflict-of-laws rules designed to safeguard Russian interests in the field of marine insurance, and judicial practice in the period from 2022–2025 has consolidated their application.

1) Exclusive jurisdiction of Russian courts for disputes involving sanctioned persons

Article 248.1 of the Commercial Procedure Code of the Russian Federation (introduced in 2020) permits Russian commercial courts to hear disputes involving sanctioned persons even where the contract provides for foreign jurisdiction or arbitration. The Supreme Court of the Russian Federation confirmed the applicability of this provision in its Ruling of 28 November 2024 in case No. A40-214726/2023 (NS Bank v Lukoil Securities BV): despite an LCIA arbitration clause and an English law choice, a dispute between Russian companies based on the argument that EU sanctions blocked payment on Eurobonds was held to fall within Russian jurisdiction¹⁴ The Supreme Court of the Russian Federation held that where sanctions are the immediate cause of the dispute, hearing the case abroad calls into question the independence and impartiality of adjudication, since a foreign court or arbitral tribunal is, in effect, compelled to treat the sanctions as lawful. The Court identified obstacles such as inability to pay fees in a foreign arbitral institution, inability to retain foreign counsel, or inability to attend hearings due to visa and transport restrictions. The presence of any such factor is sufficient to transfer proceedings to a Russian court. Thus, the Supreme Court expanded the practical scope of Article 248.1: even disputes between two Russian entities may be brought within Russian jurisdiction where sanctions are the cause of the dispute, notwithstanding a foreign jurisdiction clause.

Alongside this, Article 248.2 of the Commercial Procedure Code of the Russian Federation empowers Russian courts to enjoin a party from initiating or continuing foreign proceedings to circumvent the jurisdiction of Russian courts (a Russian-style anti-suit injunction). Taken together, these provisions are designed to neutralise the impact of foreign sanctions on the choice of governing law and dispute resolution forum.

2) Refusal to recognition and enforcement of foreign judgments and awards on “public policy” grounds due to sanctions

Russian law (Article 244 of the Commercial Procedure Code of Russian Federation; Article 36 of the Law of the Russian Federation №. 5338-1 “On International Commercial Arbitration” dated 7 July 1993) permits refusal of recognition or enforcement of foreign arbitral award where such award would violate public policy. Until 2022, this ground was applied relatively rarely, but sanctions have stimulated its use. Judicial practice in late 2022-2024 has articulated the concept of a “new public policy,” encompassing the counter-sanctions Decrees of the President of the Russian Federation and Resolutions of the Government. These instruments (including Decrees No. 79, 81, 252, 254 of 2022, among others¹⁵), which introduce restrictions on transactions involving “unfriendly” states are now regarded as part of Russia’s fundamental legal order. Consequently, enforcement of a foreign award requiring conduct in breach of such measures is treated as contrary to public policy.

On 16 October 2023, a Russian court refused enforcement of an LCIA award dated 8 February 2022 in a dispute between a Swiss and a Russian company, reasoning that enforcement would breach presidential decrees and Government Order No. 430-r.¹⁶

Similarly, on 24 July 2023 the Commercial Court of the Moscow District relied on Decree No. 79 (concerning the list of “unfriendly” countries) when refusing recognition of US court judgments.

In a judgment of the Commercial Court of Rostov District dated 16 January 2024, the court expressly stated that presidential counter-sanctions decrees constitute a “new public policy” precluding enforcement of sanctions-related claims.¹⁷ In that case concerning enforcement of an award of the London Maritime Arbitrators Association between an Estonian company and a Russian shipping company, the court identified a range of grounds for refusal, from improper service and the respondent’s inability to participate in the arbitral proceedings to the invalidity of the arbitration clause. The decisive consideration, however, was that enforcement of the foreign award would entail payment to a foreign creditor without the requisite authorisation of the Government Commission, which is impermissible under the “new” principles of Russian public policy. Notably, even awards rendered prior to sanctions may be refused enforcement where, under new conditions, enforcement would conflict with fundamental principles (such as equality of parties). In the case in question, the court observed that by 2022 the parties’ position had materially changed: the foreign company ceased operations in Russia, while the Russian party had lost the ability to operate in Switzerland, resulting in an imbalance incompatible with the principle of equality.

Accordingly, Russian courts have been actively invoking “public policy” as an exception to the obligations under the 1958 New York Convention, refusing recognition and enforcement of foreign arbitral awards where either their outcome or enforcement conflicts with Russian counter-sanctions regulations and fundamental principles of justice. This practice, particularly in cases decided in 2023–2024, has become a new reality for marine insurance substantially reducing the predictability of cross-border enforcement.

At the same time, the Supreme Court of the Russian Federation has sought to prevent overbroad interpretation of the term “public policy.” The Court emphasises the exceptional nature of this ground, stressing that it must not be used as a means of reassessing facts or re-litigating the dispute.

For example, in its Ruling of 4 July 2025 No. 305-ES25-1488 in case No. A40-148733/2024, the Supreme Court set aside lower-court judgments which had, in effect, revisited the merits of an award rendered by the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation. The Supreme Court held that public policy review does not permit re-evaluation of facts or reconsideration of the dispute; it requires the concrete identification of socially significant violations of fundamental principles.¹⁸ In so doing, the Supreme Court reaffirmed the narrow and extraordinary character of intervention on “public policy” grounds. In the context of sanctions-related disputes, this serves as an important signal against abuse of “public policy” concept for the purpose of blocking enforcement on purely formal grounds. Practically, it means that even amid sanctions-driven turbulence, arbitral awards (including those of the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation) retain a presumption of enforceability, and Russia’s pro-arbitration stance remains intact.

3) A conflict of insurance regimes and the creation of national alternatives

The sanctions period also produced a clash of regimes in the field of ship insurance, which Russia has addressed by building national alternatives to international mechanisms. Russian National Reinsurance Company has effectively become a monopolistic reinsurer of sanctions-related risks, assuming an obligation to cover up to 50% of “sanctions” losses. As a result, by mid-2022 Russian insurers fully replaced P&I liability coverage for national tonnage.¹⁹ Liability limits reached USD 1 billion per vessel–figures comparable, by order of magnitude, to levels discussed in 2012 in the context of sanctions against Iran, when Japan considered state guarantees up to USD 1 billion and India implemented a state insurance scheme with a lower limit.²⁰ In other words, in core parameters (coverage volume and liability insurance rules), the Russian pool aims to replicate the conditions of the International Group of P&I Clubs.

4) Recognition of Russian policies abroad

In parallel, efforts were undertaken to secure recognition of Russian insurance policies abroad. Turkey promptly stated that it would admit tankers under Russian cover,²¹ whereas India and China initially adopted a wait-and-see approach.²² However, in late 2022, the Ministry of Transport of the Russian Federation reported that India largely recognises Russian insurance, while China recognises it only partially; the final parameters are to be settled through intergovernmental agreements. The issue did not reach a critical scale (the Russian-flag fleet accounts for only about 1.5% of foreign trade cargoes; the remainder is carried by foreign-flag vessels²³). Key importers of Russian oil continued to accept vessels covered domestically: neither China nor India prohibited the entry of tankers of Russian shipping companies insured through the Russian pool.

Moreover, during 2023–2025, regulatory-level recognition began to emerge. In 2025, the Directorate General of Shipping of India included five Russian insurers (Ingosstrakh, AlfaStrakhovanie, SOGAZ, VSK, and Soglasie) in the list of companies authorised to provide insurance for vessels calling at Indian ports.²⁴ Four of them received five-year extensions (until 2030), while Soglasie received authorisation until 2026. This decision was taken immediately after the tightening of US sanctions in January 2025, under which Ingosstrakh and AlfaStrakhovanie themselves were added to the sanctions list.²⁵ In substance, the Indian regulator created an alternative “white list” of insurers outside the International Group of P&I Clubs, an initiative reflecting the objective of ensuring uninterrupted supplies of energy resources from Russia.

The Chinese authorities have not yet formally announced recognition of Russian insurance cover, mindful of secondary sanctions risk. In practice, however, China has been making active use of the new mechanism: a substantial share of oil exports is now carried by tankers of the so-called “shadow fleet” insured outside the Western market, including by Russian insurers. According to a Bloomberg investigation, by summer 2024 at least 20–25% of tankers carrying Russian oil had cover provided by Russian insurance companies; the true share may be higher given that further 15–20% of vessels are insured in “third” countries (for instance, by insurers in Cameroon or Kyrgyzstan) with reinsurance support from Russia.²⁶

Sanctions have complicated both arbitral proceedings and subsequent enforcement of arbitral awards. In particular, the participation in proceedings by parties or arbitrators subject to sanctions may require specific authorisations. In the United States, OFAC rules strictly prohibit providing services to designated persons without a licence, rules which extend to arbitration.²⁷ US arbitrators and counsel engaged in proceedings involving a sanctioned person required to have OFAC licence; otherwise, they risk penalties for sanction circumvention. In practice, lack of licensing can paralyze proceedings. In United Media Holdings NV v. Forbes Media LLC, the arbitration between an American party and a sanctioned party was suspended on several occasions because OFAC did not timely issue a licence to permit payment of the arbitrators’ fees; only after authorisation was granted could the dispute proceed to an award.²⁸

In the United Kingdom, legal assistance to designated persons is generally permissible; however, receipt of payment for such legal services (including reasonable disbursements) requires an OFSI licence. This applies to participation in court proceedings and dispute resolution which encompasses arbitral representation.²⁹ In response to these constraints, parties increasingly relocate proceedings from Europe and the United States to neutral jurisdictions in Asia, the Middle East, and elsewhere, where such barriers are less acute.

Sanctions, however, do not render maritime disputes non-arbitrable. Arbitration agreements in maritime contracts remain legally effective, as confirmed by practice. By way of example, the US District Court for the Southern District of New York in Belship Navigation Inc v Sealift Inc compelled the parties to submit their dispute to arbitration, even though the charterparty itself was held void for violating US sanctions against Cuba³⁰. The court observed that the “public policy” exception under the 1958 New York Convention is not designed to accommodate shifting political “winds;” rather, “the Convention’s “supranational goal is to encourage the enforcement of international arbitration agreements, and a narrowly national refusal to honour them would be inconsistent with that objective.”³¹ Arbitration was therefore permitted, even though any damages awarded to Belship would in any event have remained in a blocked account until the sanctions were lifted. The precedent is instructive: even where there is an obvious conflict with sanctions policy, courts safeguard the autonomy of the arbitration clause by treating it as separable from the substantive invalidity of the main contract, in line with the doctrine of separability.

At the enforcement stage, the sanctions regime is often felt most acutely. Even if arbitration occurred in a neutral seat, the resulting award may be unenforceable due to public policy (Article V(2) (b) of the New York Convention). National courts assess whether enforcement would violate sanctions restrictions. As discussed, Russian courts tend to find a public policy violation. Other jurisdictions take a more nuanced approach: they seek to preserve the Convention’s pro-arbitration spirit while accounting for sanctions legislation. US courts, for example, distinguish between recongniting an award and actual payment. In Ministry of Defense of Iran v. Cubic Defense, the court recognised an award in favor of an Iranian party but held that payment could occur only with an OFAC licence; confirmation itself did not violate public policy because funds would remain blocked.³² Similarly, in Belship the court emphasised that “public policy” is triggered only by violations of “the most basic notions of morality and justice,” and enforcement of an arbitration agreement does not meet that standard. In addition, some sanctions regimes explicitly provide that the fulfilment of claims and enforcement actions facilitating sanctions circumvention are impermissible (for instance, US sanctions related to Venezuela may require OFAC authorisation for payment of arbitration costs). Accordingly, a sanctions-related award may be recognised by a court, while its execution may be contingent on authorisation from the relevant sanctions authority.

Overall, the sanctions regime requires all participants in maritime arbitration–parties, arbitrators, and courts to continuously account for conflict-of-laws considerations and sanctions compliance. Nevertheless, core principles of international arbitration (autonomy of the arbitration agreement, neutrality of the forum) remain operative even under sanctions pressure. Maritime disputes continue to be resolved through arbitration, albeit with procedural adaptations. Arbitrators and counsel increasingly design sanctions-sensitive solutions, conditional payment arrangements, escrow structures, alternative currencies and banks, and, where necessary, obtain general or specific regulatory licences to enable proceedings. International institutions are also seeking to develop common approaches to ensure that sanctions-related disruptions have a minimal impact on the predictability and enforceability of awards in maritime commerce.

Conclusion

Marine insurance under sanctions has become a focal point of legal challenges, generating new trends. By 2025, the Russian legal system had developed a comprehensive response to sanctions-related risks in marine insurance, from establishing special jurisdiction and refusing the recognition (and enforcement) of foreign judgments and arbitral awards to building domestic insurance institutions, thereby reducing conflict-of-laws issues and preserving the resilience of maritime transport under sanctions. Russia is constructing an autonomous system: direct insurance through national companies, reinsurance through Russian National Reinsurance Company, while certain states, such as China and India, recognise Russian insurance cover. Iran has pursued a similar trajectory since 2012, and China in recent years has expanded domestic insurance capacity to cover its own sanctions exposure. An alternative pool of insurers is emerging, operating in parallel with the International Group of P&I Clubs and the Lloyd’s market.

A second trend is heightened attention to contractual legal engineering. A new generation of sanctions clauses has emerged (including in Lloyd’s wordings), along with terms providing for contractual adjustment upon changes in sanctions regimes and specialised force majeure clauses tailored to sanctions scenarios. The future trajectory of marine insurance regulation will depend heavily on politi cal developments. If sanctions ease, global insurance linkages may recover and unified rules may be developed incorporating lessons from the crisis. For example, under UN auspices or through specialised international organizations, a form of “sanctions protocol” could be adopted, providing temporary licences for insuring humanitarian shipments or establishing special settlement mechanisms where assets are frozen.

If sanctions persist long-term, however, a dual-standard environment may become the norm: parallel legal regimes will demand high expertise in conflict of laws and international arbitration. Marine insurance thus increasingly sits at the intersection of private and public law. Lawyers must account for the Merchant Shipping Code of the Russian Federation, EU regulations, US statutes (for example, CAATSA³³), and evolving judicial and arbitral practice.

Deep legal analysis is required for each insurance contract and for claims handling in sanctions-affected contexts. The experience of recent years has exposed vulnerabilities in legal mechanisms while also demonstrating their capacity for adaptation. Further evolution of insurance law is likely, through closer coordination among BRICS and other states and through gradual development of an international legal consensus in marine insurance grounded in a balanced accommodation of all maritime trade participants’ interests. Only on this basis can insurance fully perform its core function again: providing certainty and protection against risk in global maritime commerce, regardless of political storms or calms. ■